What is Title Insurance and What Does it Cover in Ontario?
A critical yet often overlooked component of real estate transactions, Title insurance is very significant whether you're a first-time homebuyer or an experienced property investor. Understanding title insurance is important to help you protect your investment. In this article, we will help you understand the various aspects of title insurance, like what is covered by it, the effect of a rebuilt title in insurance, where to buy title insurance in Ontario, and whether it is mandatory in Ontario.
What is Title Insurance?
A type of insurance policy that protects property owners and lenders against losses related to defects in the title of a property, the term "title" is the legal term for the ownership rights to a property, and defects including errors in public records, undisclosed liens, or even a fraud.
You always expect to have clear ownership of the title, while purchasing a property. However, hidden issues can arise after the purchase, potentially threatening your ownership rights. Title insurance provides you with protection against these risks, covering the legal costs of defending your ownership and, in some cases, even compensating you for any financial loss.
What Does Title Insurance Cover?
Title insurance usually covers:
- Unknown Liens: Unpaid debts, like taxes or contractor fees, if any by the previous owner become a lien against the property. Title insurance protects you from these liens if they arise after you’ve purchased the property.
- Errors in Public Records: Any mistakes in public records, like incorrect information or errors in the legal description of the property, can cloud the title. This can be corrected through Title insurance.
- Fraud and Forgery: A forged or fraudulent deed or other document in the property’s history can be a matter of great inconvenience in property matters but title insurance protects your ownership rights.
- Encroachments and Easements: An easement is someone else having a legal right to use a part of your property or your property encroaching on someone else’s land. This can be protected by title insurance.
- Missing Heirs: Title insurance can also defend your claim to the property if a former owner of the property passes away, and a missing heir later claims ownership.
It’s pertinent for us to mention here that title insurance is usually a one-time purchase that offers you coverage for as long as you or your heirs own the property
Does a Rebuilt Title Affect Insurance?
A vehicle that was previously deemed a total loss but has since been repaired and passed a safety inspection is classified by a Rebuilt Title. Usually associated with vehicles, understanding the implications of this term in the context of insurance is important.
How Does a Rebuilt Title Affect Insurance?
A rebuilt title can significantly affect insurance premiums and coverage in the case of Vehicles as the vehicles with rebuilt titles are usually considered at higher risk for having been involved in serious accidents or sustained major damage, resulting in :
- Higher Premiums: Higher premiums may be charged by insurance companies to insure a vehicle with a rebuilt title due to the increased risk.
- Limited Coverage: Some insurers may offer only liability coverage, and refuse to cover comprehensive or collision insurance on rebuilt title vehicles. Coverage may also altogether be declined by a few companies.
- Reduced Payouts: The payout for a rebuilt title vehicle, in the case of a claim, might be lower than for a vehicle with a clean title owing to its reduced market value.
Where can one Buy Title Insurance in Ontario
You can purchase Title Insurance providers from various providers that including insurance companies and title companies through your real estate lawyer. Your lawyer helps you to compare and understand policies to ensure you get the coverage that best meets your needs. We at House Closing ensure that our clients are fully protected against any kind of fraud or oversight while purchasing a property.
Main Title Insurance Providers in Ontario:
- TitlePLUS
- Stewart
- FCT (First Canadian Title)
You can purchase title insurance at the time of your property closing through your real estate lawyer, who helps you to facilitate the process and ensure that the policy matches and aligns with your particular needs.
Is Title Insurance Mandatory in Ontario?
Though not mandatory in Ontario, Title Insurance is highly recommended. Even if it's not legally required to purchase title insurance when buying a property, most mortgage lenders in Ontario will ask for it as a condition while granting a loan. Moreover, the benefits of having title insurance far outweigh its relatively low cost, offering you peace of mind and protecting your ownership rights.
Why Consider Title Insurance?
- Protection Against Unexpected Costs: Lack of title insurance, can lead you to legal disputes or financial losses related to title defects, which can be incredibly costly.
- One-Time Payment for Lifetime Coverage: Unlike other types of insurance that require ongoing payments, title insurance has a one-time premium that provides you coverage for as long as you own the property.
- Lender’s Requirements: Your lender ( If you’re taking out a mortgage) might require you to purchase title insurance as a safeguard against any title-related issues that could affect their investment in your property.
To sum it up, while title insurance is not compulsory in Ontario, it is an extreme protection for any property buyer, against unforeseen issues that could threaten their ownership rights
Conclusion
Title insurance is a crucial component of real estate transactions, offering protection against a range of potential title defects that could otherwise lead to costly legal disputes and financial losses. Irrespective of whether you’re a first-time homebuyer or a seasoned investor, understanding what title insurance covers, how a rebuilt title can impact insurance, and where to buy title insurance in Ontario can help you make informed decisions and protect your investment.
As you navigate the intricacies of real estate, remember that title insurance is a one-time investment that can provide lifetime protection. Our firm’s experienced real estate lawyers can help you compare different policies and find the coverage that best suits your needs.
